Suppose £1 is trading for $2.00 in New York City and $1.80 in London. A foreign exchange trader could take $1.80 and buy £1 in London's financial exchange market and then sell it for $2.00 in New York's financial exchange market. What is this an example of?

Question

Quizplus · Accepted Answer

This is an example of two-point arbitrage, where a trader exploits the price differences of the same asset (in this case, currency) in two different markets to make a profit.

Suppose £1 Is Trading for $2